College is Expensive!
There is no way around it. College is very expensive. College tuition can cost tens of thousands of dollars; when you add in books and room/ board, you are looking at $20,000 a year. You can offset the costs by applying for scholarships and financial aid, however, you should not rely on these methods to pay for college. You should begin saving for college as soon as possible. Saving a little bit at a time can help pay for the costs associated with college. Finding the best way to earn interest for college can greatly increase the amount of money that a student or family saves up for a college education.
Certificates of Deposit
Certificates of deposit, otherwise known as CD’s, are very effective ways to save up for college and may be the best way to earn interest. The certificate of deposit has a higher interest rate than the average savings account and a high fee is exacted from any money that would be otherwise removed from the account before it matures. This helps to encourage students and parents to leave the money where it is and not spend it on anything but the child’s college education.
While most IRA’s (individual retirement accounts) are designed for retirement, they can also be used as a high interest means of saving for college. While this is not always the best way to earn interest for college, because the interest rates are typically lower than those of CD’s, they are very effective as long term savings accounts. These savings accounts can be used in such a way that a partial amount can be withdrawn at a time. This method allows the account to continue to accrue interest while the student is paying for college with part of the funds.
Annuities enable a student to take money out of the account before it matures. This high interest bearing account is great for those students who may enter college early or are taking college classes while in high school. They often do not have the highest interest rates, but they are the easiest to use. They allow a different amount of money to be deposited and can be maxed out yearly to increase the interest rate. They also have longer durations, making it possible to open an account when the child is born and continue the account until the child is ready for college. These accounts also enable a person to remove some of the money before it is completely mature without the heavy penalty.
Opening an Interest Bearing Savings Account
When opening an interest bearing savings account for your child for their college education, think ahead to the possibility that they may not want to attend college. If you are still willing to give the child the money that you had saved for college, then place the account in his or her name with you as the administrator. If you are not willing to give them the money you set aside for their education, consider putting the account in your name. This way, if they do not attend college, you can use the money to upgrade your home, make a large purchase, or take the trip of a lifetime.